ABSTRACT
One of the lessons of the Asian Currency Crises is the danger of the de facto dollar peg adopted by Asian economies that had extensive trade and investment relationships with countries other than the United States.2 When the yen appreciated vis-à-vis the US dollar, the Asian economies enjoyed a boom, or a bubble in some cases, due to increased exports. But when the yen depreciated, these same Asian economies tended to experience a recession, or a burst bubble. The experience of the Asian boom and bust in the 1990s, along with the yen-dollar exchange rate fluctuation, is a stark reminder of risk of the fixed exchange rate regime.
